[Federal Register Volume 67, Number 154 (Friday, August 9, 2002)]
[Proposed Rules]
[Pages 51779-51783]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-20163]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 67, No. 154 / Friday, August 9, 2002 / 
Proposed Rules  

[[Page 51779]]


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DEPARTMENT OF AGRICULTURE

Food and Nutrition Service

7 CFR Part 245

RIN:0584--AD20


Determining Eligibility for Free and Reduced Price Meals and Free 
Milk in Schools--Verification Reporting and Recordkeeping Requirements

AGENCY: Food and Nutrition Service, USDA.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: This rule proposes to amend the reporting and recordkeeping 
requirements under the National School Lunch Program (NSLP), School 
Breakfast Program (SBP), and Special Milk Program (SMP) relating to the 
verification of free and reduced price meal applications. Schools would 
report verification activities and results to State agencies, who would 
consolidate and report it to the Food and Nutrition Service (FNS) and 
take action as they deem appropriate. Over the years, administering 
State agencies have conducted comprehensive on-site evaluations of 
school food authorities participating in the NSLP.
    The findings indicate that school food authorities generally have 
been determining free and reduced price eligibility in accordance with 
the regulatory requirements. However, in spite of their efforts, data 
indicate that the number of children certified as eligible to receive 
free meals exceeds the number of children who should be eligible to 
receive those meals, given other poverty indicators. This rule would 
require school food authorities to report verification activity and 
results to their respective State agencies and require State agencies 
to analyze and act on these data and to report school food authority 
level data to the FNS. Recordkeeping requirements would be revised 
consistent with the reporting requirements. Submission of these data on 
a school food authority basis will enable State agencies and FNS to 
improve and target oversight activities.

DATES: To be assured of consideration, comments must be postmarked on 
or before October 8, 2002.

ADDRESSES: Address all comments concerning this proposed rule to Robert 
M. Eadie, Chief, Policy and Program Development Branch, Child Nutrition 
Division, Food and Nutrition Service, USDA, 3101 Park Center Drive, 
Alexandria, VA 22302. You also may submit comments electronically at 
[email protected]. All written submissions received will be 
available for public inspection in Room 640 at the address listed 
above, during regular business hours (8:30 am to 5:00 pm) Monday 
through Friday.

FOR FURTHER INFORMATION CONTACT: Robert M. Eadie at the above address 
or by telephone at 703-305-2590.

SUPPLEMENTARY INFORMATION:

Background

I. The Application Process

    Under the NSLP, each school year school food authorities distribute 
applications for free and reduced price meal benefits to households of 
enrolled children. Households who want to receive free and reduced 
price meal benefits for their children complete the information 
required on the application and return the application to the school 
food authority.
    School food authorities must approve or deny applications based on 
the information presented on the application. If an application 
contains the required information and the information establishes the 
child's eligibility for free or reduced price meal benefits, the school 
food authority must approve the application. However, if the 
determining official believes or suspects the information is 
questionable, the determining official has an obligation to ask the 
household to submit additional information and revise the determination 
based on their findings.
    Since 1991, school food authorities have also had the option to 
certify children for free meal benefits without the use of applications 
if these children are members of food stamp, Temporary Assistance for 
Needy Families (TANF), or Food Distribution Program on Indian 
Reservations (FDPIR) households. This procedure is known as ``direct 
certification.'' A school food authority may communicate with a State 
or local agency to obtain documentation that establishes which of its 
enrolled students are members of food stamp/TANF/FDPIR households, and 
may certify the identified children for free meal benefits on the basis 
of this documentation.
    Note that the free and reduced price eligibility criteria for the 
SBP are the same as for the NSLP. In fact, the same application is used 
when a school participates in both the NSLP and SBP. The free 
eligibility criteria and determination process used in the SMP 
parallels that of the NSLP and the SBP.

II. The Verification Process

    School food authorities must verify the eligibility information on 
a sample of the free and reduced price meal applications approved in 
any given school year as specified in 7 CFR 245.6a. The eligibility of 
students that were directly certified for free meal benefits and 
applications for free milk under the SMP is not subject to the 
verification requirements. Generally, school food authorities verify a 
randomly selected sample (minimum of 3%) of the applications that have 
been approved for free and reduced price meal benefits.
    Alternatively, a school food authority may verify a focused sample 
of 1% of the total number of all approved applications in the school 
food authority, selected from those with income within $100 of the 
monthly income eligibility guidelines ($1200 annually), as well as 
selecting \1/2\% of the total number of applications approved based on 
categorical eligibility through participation in the Food Stamp 
Program, TANF or FDPIR.

III. Current Verification Recordkeeping Requirements

    As mentioned above, each school food authority must select and 
verify a sample of applications approved for free and reduced price 
benefits each school year, unless the State agency assumes 
responsibility for verification or the school food authority is 
otherwise exempt from the verification requirement. School food 
authorities may do either random or focused sampling, or they may 
choose to verify all of the applications received. While school food 
authorities are not currently required to report information related to 
the verification process to the State

[[Page 51780]]

agency or to the FNS, school food authorities are required to maintain 
a description of their verification efforts. The description must 
include: (1) A summary of the verification efforts including the 
selection process (i.e. random, focused, or all); (2) the total number 
of applications on file on October 31; and (3) the percentage or number 
of applications that are or will be verified by December 15. In 
addition, verified applications must be readily retrievable by school. 
For each application verified, the school food authority must keep 
records of the source of information used to verify the application 
such as the food stamp office, wage stubs, or collateral contacts. 
Existing verification recordkeeping requirements are found at 7 CFR 
245.6a(c).

IV. Need To Report the Verification Information

    Over the years, the administering State agencies have conducted 
comprehensive on-site evaluations of school food authorities 
participating in the NSLP. The findings indicate that school food 
authorities generally have been determining free and reduced price 
eligibility in accordance with the regulatory requirements and 
completing verification. In spite of their efforts, the number of 
children approved for free meal benefits appears to exceed the number 
of children who are eligible to receive those meals.
    Several data sources, including the eligibility verifications 
performed by school districts, indicate that a significant and 
increasing number of ineligible children are being certified for free 
and reduced price meal benefits. Recent comparisons of NSLP data with 
data from the U.S. Bureau of the Census, Current Population Survey 
(CPS) indicate that the number of children determined eligible for free 
meal benefits in the NSLP exceeds the number of children that the CPS 
indicates are potentially eligible. In 1999, the percentage of children 
determined eligible for free school meals was estimated to be 127 
percent of the CPS estimate of school-aged children at or below 130 
percent of the poverty guidelines, the income level required for free 
participation by section 9(b) of the Richard B. Russell National School 
Lunch Act, 42 USC 1758(b).
    This data comparison is further supported by audit survey work by 
the U.S. Department of Agriculture's (USDA) Office of Inspector General 
(OIG). The OIG determined that in one State nearly 20% of the approved 
free or reduced price meal applications selected for verification 
resulted in a loss of those benefits because the households did not 
respond or the households' responses disclosed that the original 
classifications were in error (Food and Nutrition Service National 
School Lunch Program Verification of Applications in Illinois: Audit 
Report No. 27010-0011-Ch).
    The Department is concerned that if large numbers of ineligible 
children are receiving benefits to which they are not entitled, Federal 
meal reimbursement payments are improperly paid. Certification error 
also has a significant impact on the targeting of Federal and State 
education-related benefits. The amount of school lunch program funds 
allocated nationwide on the basis of the free and reduced price 
certifications was just under $5 billion for school year 2001-2002; 
more than triple this amount in education-related benefits was 
allocated using the data.
    FNS has taken several actions to address the issues associated with 
certification. On January 21, 2000, FNS published a notice in the 
Federal Register (65 FR 3409) soliciting pilot projects to test 
alternate application, approval and verification procedures for free 
and reduced price eligibility determinations. Twenty-one school food 
authorities and one State are currently operating pilot projects. These 
pilot sites are conducting alternative certification or verification 
processes for 3 consecutive school years, beginning in school year 
2000-2001. Preliminary data has shown the alternative methods have, to 
varying degrees, deterred and detected misreporting of eligibility 
information. FNS is conducting an in-depth analysis of the 
administrative data presented by pilot school food authorities. While 
the information derived from the pilots is not nationally 
representative, pilot activities have provided FNS with insight on the 
efficacy of the existing application and verification process and on 
alternatives to that process. This rule is intended to complement pilot 
activities by collecting information on verification activity 
nationwide and will enable FNS to evaluate the pilot results in the 
context of State and nationwide data.
    Secondly, FNS is taking steps to increase the emphasis by FNS 
regional offices and State agencies on certification and verification 
procedures at the local level. Reporting of verification results is 
integral to this effort. FNS, State agencies, and school food 
authorities need to have a clear understanding of the magnitude and 
characteristics of the certification problem in order to provide 
effective oversight and target corrective action. FNS intends that this 
data collection will result in improvement of our understanding of the 
operations of the eligibility determination and verification process in 
the targeting of monitoring and technical assistance efforts and 
resources on areas or households with the likelihood of problems.

V. What Are the Provisions of This Proposal?

    FNS is proposing to amend 7 CFR 245.6a(c) to require school food 
authorities to report verification activity and results to their 
respective State agency in support of State agency and FNS oversight 
activities. Specifically, proposed Sec. 245.6a(c) would require that, 
by March 1 of each year, school food authorities must report 
verification information to the State agency on a form designated by 
FNS. The information to be reported will address, but not be limited 
to, the characteristics of the verification sample and the results of 
verification activity. Examples of information to be collected would 
include: the number of children approved for free and reduced price 
meal benefits based on direct certification, income applications, and 
categorically eligible applications; the method of verification sample 
selection; the number of applications selected for verification; the 
number of students on selected applications; the number of students 
approved for free meal benefits and reduced price meal benefits whose 
eligibility for benefits were reduced or terminated as the result of 
verification; the number of non-respondents; and the number of students 
reinstated for free or reduced price meal benefits, as of February 15 
of each year.
    In addition, proposed Sec. 245.6a(c) would require school food 
authorities to retain copies of the information reported and all 
supporting documents. The proposed rule also restates the existing 
requirements that verified applications must be readily retrievable by 
school and that school food authorities must retain all documents 
submitted by the household to confirm eligibility, reproductions of 
those documents, or annotations made by the determining official which 
indicate which documents were submitted by the household and the date 
of submission. The existing requirement that relevant correspondences 
between the households selected for verification and the school food 
authority/school must be retained is also restated.
    FNS is also proposing to add Sec. 245.11(i) to require each State 
agency to collect the annual verification data from each school food 
authority, in accordance with guidance provided by

[[Page 51781]]

FNS. To facilitate the reporting of these data, FNS will provide a data 
collection instrument in electronic format. In addition, each State 
agency must analyze these data, determine if there are potential 
problems, and formulate corrective actions and technical assistance 
activities that will support the objective of certifying only those 
children eligible for free or reduced price meals. The availability of 
this information at the State level will permit State agencies to 
target more rigorous oversight activities on school food authorities 
whose verification activities result in a high termination rate.
    The proposal would require the State agency to report to FNS, not 
later than April 15 of each year, each school food authority's 
verification information, submitted in accordance with Sec. 245.6a(c), 
and any ameliorative actions the State agency has taken or intends to 
take in school food authorities with high levels of applications 
changed due to verification. FNS intends to provide for the electronic 
submission of these data.
    Additionally, this proposed rule would include in 7 CFR part 245 
the term FNS which means ``the Food and Nutrition Service of the 
Department of Agriculture''. This definition was inadvertently not 
included in this Part in earlier editions and FNS is proposing at this 
time to add the definition at 7 CFR 245.2(b-2) for the sake of clarity 
and completeness.

VI. Procedural Matters

Executive Order 12866
    This proposed rule has been determined to be non-significant and is 
not subject to review by the Office of Management and Budget under 
Executive Order 12866.

Public Law 104-4

    Title II of the Unfunded Mandates Reform Act of 1995 (UMRA), Public 
Law 104-4, establishes a requirement for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments and the private sector. Under section 202 of the UMRA, FNS 
generally prepares a written statement, including a cost-benefit 
analysis. This is done for proposed and final rules that have ``Federal 
mandates'' which may result in expenditures of $100 million or more in 
any one year by State, local, or tribal governments, in the aggregate, 
or by the private sector. When this statement is needed for a rule, 
section 205 of the UMRA generally requires FNS to identify and consider 
a reasonable number of regulatory alternatives. It must then adopt the 
least costly, most cost-effective or least burdensome alternative that 
achieves the objectives of the rule.
    This proposed rule contains no Federal mandates of $100 million or 
more in any one year (under regulatory provisions of Title II of the 
UMRA) for State, local, and tribal governments or the private sector. 
Thus, this proposed rule is not subject to the requirements of sections 
202 and 205 of the UMRA.
Regulatory Flexibility Act
    This proposed rule has been reviewed with regard to the 
requirements of the Regulatory Flexibility Act (5 U.S.C. 601-612). Eric 
M. Bost, Under Secretary for Food, Nutrition and Consumer Service, has 
certified that this rule will not have a significant economic impact on 
a substantial number of small entities. By requiring the reporting of 
verification information, this rule would result in critical 
information being gathered and enable State agencies and FNS to take 
measures that would increase the level of accountability of those 
programs. FNS does not anticipate any adverse fiscal impact resulting 
from implementation of this rulemaking. Although there may be some 
burdens associated with this rule, the burdens would not be significant 
and would be outweighed by the benefits to programs reporting the 
information to the State agency and FNS.
Executive Order 12372
    The National School Lunch Program and School Breakfast Program are 
listed in the Catalog of Federal Domestic Assistance under No. 10.555 
and 10.556. These programs are subject to the provisions of Executive 
Order 12372, which requires intergovernmental consultation with State 
and local officials (7 CFR part 3015, subpart V, and final rule related 
notice at 48 FR 29115, June 24, 1983).
Executive Order 12988
    This proposed rule has been reviewed under Executive Order 12988, 
Civil Justice Reform. It is intended to have preemptive effect with 
respect to any State or local laws, regulations or policies which 
conflict with its provisions or which would impede its full 
implementation. This rule is not intended to have retroactive effect 
unless that is specified in the Effective Date section of the preamble 
of the final rule. Before any judicial challenge to the provisions of 
this rule or the application of its provisions, all administrative 
procedures that apply must be followed. The only administrative appeal 
procedures relevant to this proposed rule are the hearings that FNS 
must provide for decisions relating to eligibility for free and reduced 
price meals and free milk (7 CFR 245.7 for the NSLP, SBP, and SMP in 
schools).

Paperwork Reduction Act

    In accordance with the Paperwork Reduction Act of 1995, 44 U.S.C. 
3507, this notice invites the general public and other public agencies 
to comment on the proposed information collection.
    Written comments must be received on or before October 8, 2002.
    Comments concerning the information collection aspects of this 
proposed rule should be sent to Lauren Whittenberg, Desk Officer, 
Office of Information and Regulatory Affairs, Office of Management and 
Budget (OMB), Washington, DC. 20503. A copy of these comments may also 
be sent to Mr. Eadie at the address listed in the ADDRESSES section of 
this preamble. Commenters are asked to separate their information 
collection requirements comments from their comments on the remainder 
of this proposed rule.
    OMB is required to make a decision concerning the collection of 
information contained in this proposed regulation between 30 and 60 
days after the publication of this document in the Federal Register. 
Therefore, a comment to OMB is best assured of having its full effect 
if OMB receives it within 30 days of publication. This does not affect 
the deadline for the public to comment to the Department on the 
proposed regulation.
    Comments are invited on: (a) Whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the agency, including whether the information has practical utility; 
(b) the accuracy of the agency's estimate of the proposed collection of 
information, including the validity of the methodology and assumptions 
used; (c) ways to enhance the quality, utility, and clarity of the 
information to be collected; and (d) ways to minimize the burden of the 
collection of information on those who are to respond, including 
through the use of appropriate automated, electronic, mechanical, or 
other technological collection techniques or other forms of information 
technology.
    The title, description, and respondent description of the 
information collections are shown below with an estimate of the annual 
recordkeeping burdens. Included in the estimate is the time for 
reviewing instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information.

[[Page 51782]]

    Title: 7 CFR part 245 Determining Eligibility for Free and Reduced 
Price Meals and Free Milk in Schools.
    OMB Number: 0584-0026.
    Expiration Date: August 31, 2004.
    Type of Request: Revision of currently approved collection of data 
related to the free and reduced price meal application in the NSLP, SBP 
and SMP.
    Abstract: Under this proposal, school food authorities would report 
verification data to the State agency and State agencies would evaluate 
and submit this information to FNS.

                                        Estimated Annual Reporting Burden
----------------------------------------------------------------------------------------------------------------
                                                                                  Average burden
                                      Section      Annual number      Annual       per response    Annual burden
                                                  of respondents     frequency         hours           hours
----------------------------------------------------------------------------------------------------------------
                     School food authorities report verification information to State agency
----------------------------------------------------------------------------------------------------------------
Existing........................                               0               0               0               0
Proposed........................       245.6a(c)          16,342               1               1          16,342
Total Reporting Burden:
Total Existing..................               0  ..............  ..............  ..............  ..............
Total Proposed..................          16,342  ..............  ..............  ..............  ..............
Change..........................         +16,342  ..............  ..............  ..............  ..............
----------------------------------------------------------------------------------------------------------------
                                State agencies report district level data to FNS
----------------------------------------------------------------------------------------------------------------
Existing........................  ..............               0               0               0  ..............
Proposed........................       245.11(i)              54               1               8             432
Total Reporting Burden:
Total Existing..................               0  ..............  ..............  ..............  ..............
Total Proposed..................             432  ..............  ..............  ..............  ..............
Change..........................            +432  ..............  ..............  ..............  ..............
----------------------------------------------------------------------------------------------------------------


                                      Estimated Annual Recordkeeping Burden
----------------------------------------------------------------------------------------------------------------
                                                   Annual number      Annual      Average burden   Annual burden
                                      Section     of respondents     frequency     per response        hours
----------------------------------------------------------------------------------------------------------------
                        School food authorities maintain summary of verification efforts
----------------------------------------------------------------------------------------------------------------
Existing........................       245.6a(c)          16,342               1             .75          12,256
Proposed........................       245.6a(c)          16,342               1             .85          13,891
Total Recordkeeping Burden:
Total Existing..................          12,256
Total Proposed..................          13,891
Change..........................          +1,635
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                                    State agencies retain district level data
----------------------------------------------------------------------------------------------------------------
Existing........................              --               0               0               0               0
Proposed........................       245.11(i)              54               1               1              54
Total Recordkeeping Burden:
Total Existing..................               0
Total Proposed..................              54
Change..........................             +54
----------------------------------------------------------------------------------------------------------------

List of Subjects in 7 CFR Part 245

    Civil rights, Food assistance programs, Grant programs-education, 
Grant programs-health, Infants and children, Milk, Reporting and 
recordkeeping requirements, School breakfast and lunch programs.

    Accordingly, 7 CFR part 245 is proposed to be amended as follows:

PART 245--DETERMINING ELIGIBILITY FOR FREE AND REDUCED PRICE MEALS 
AND FREE MILK IN SCHOOLS

    1. The authority citation for part 245 continues to read as 
follows:

    Authority: 42 U.S.C. 1752, 1758, 1759a, 1772, 1773, and 1779.

    2. In Sec. 245.2:
    a. Redesignate paragraph (c) as paragraph (b-3);
    b. Redesignate paragraph (b-2) as paragraph (c) and
    c. Add a new paragraph (b-2) to read as follows:


Sec. 245.2  Definitions.

* * * * *
    (b-2) FNS means the Food and Nutrition Service, United States 
Department of Agriculture.
* * * * *
    3. In Sec. 245.6a, revise paragraph (c) to read as follows:


Sec. 245.6a  Verification requirements.

* * * * *
    (c) Verification reporting and recordkeeping requirements. Each 
year by March 1, each school food authority must report to the State 
agency information related to its verification activity on a form 
designated by FNS. School food authorities shall retain copies of the 
information reported under this section and all supporting documents. 
All verified applications must be readily retrievable by school and 
include all documents submitted by the household for the purpose of

[[Page 51783]]

confirming eligibility, reproductions of those documents, or 
annotations made by the determining official which indicate which 
documents were submitted by the household and the date of submission. 
All relevant correspondences between the households selected for 
verification and the school food authority/school must be retained.
* * * * *
    4. In Sec. 245.11, add a new paragraph (i) to read as follows:


Sec. 245.11  Action by State agencies and FNSROs.

* * * * *
    (i) No later than March 1 of each year, each State agency must 
collect annual verification data from each school food authority as 
described in Sec. 245.6a(c) and in accordance with guidelines provided 
by FNS. Each State agency must analyze these data, determine if there 
are potential problems, and formulate corrective actions and technical 
assistance activities that will support the objective of certifying 
only those children eligible for free or reduced price meals. No later 
than April 15 of each year, each State agency must report to FNS the 
verification information which has been reported to it as required 
under Sec. 245.6a(c), by school food authority, and any ameliorative 
actions the State agency has taken or intends to take in school food 
authorities with high levels of applications changed due to 
verification.

    Dated: August 5, 2002.
Roberto S. Salazar,
Administrator, Food and Nutrition Service.
[FR Doc. 02-20163 Filed 8-8-02; 8:45 am]
BILLING CODE 3410-30-P